Take-Two Interactive Drops Bid for Codemasters

The video game publisher has opted not to try to outbid Electronic Arts for the U.K.-based racing game maker.
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Shares of Take-Two Interactive Software  (TTWO) - Get Report firmed Wednesday after the video game publisher said it won’t go higher than Electronic Arts’  (EA) - Get Report $1.2 billion bid for U.K. racing game publisher Codemasters Group.

Take-Two had bid $1 billion in November. It recently traded at $201.38, up 1.12%, and has jumped 57% in the last 12 months, as the pandemic inspired video game playing. EA shares fell 1.56% Wednesday to $136.90.

Cowen analyst Doug Creutz approved of Take-Two’s decision to drop the takeover bid. "We are not surprised that Take-Two decided not to pursue at a higher bid, as management has a fairly high bar when it comes to M&A, and we don't view the deal as a strategic imperative," he wrote in a commentary cited by MarketWatch.

As for Take-Two’s take, “Take-Two remains a highly disciplined organization and, with its strong balance sheet, will continue to pursue selectively organic and inorganic opportunities that are designed to enhance the company's long-term growth and deliver results to its shareholders,” the company said in a statement.

Morningstar analyst Neil Macker puts fair value at $148 for Take-Two. “Take-Two reported a strong fiscal 2021 second quarter as revenue and EBITDA handily beat FactSet consensus expectations,” he wrote after the company’s latest earnings report in November.

“Management updated its fiscal 2021 guidance with net bookings now expected to be up 5%-9% year over year despite the company not releasing any new major, non-annualized titles in the coming year," Macker continued. "We are maintaining our narrow moat rating and expect to modestly raise our $148 fair value estimate due to a stronger fiscal 2021 and improved margin expansion from the higher-than-expected digital uptake.”